7 Things I Learned From Our Week In Austin

When Uber and Lyft pulled out of Austin last month, they made it seem like the world was going to end without them. And while there was tumult in the few weeks after their departure, no less than seveneight nine rideshare start-ups have since moved in to Austin to try and fill that void.

Last week, Christian and I headed to the capital of Texas to talk with local politicians, meet with some of the start-ups looking to take Uber/Lyft’s place and, of course, hear from drivers. We learned a lot about the situation on the ground, and today I’m going to summarize it all.

1. Worst Political Campaign Ever

One political insider in Austin referred to Uber and Lyft’s Prop 1 battle as ‘the worst political campaign in history’. The TNCs spent almost $10 million through a Political Action Committee called Ridesharing Works while their competitors spent a fraction of that, and still lost. So what happened?

To the average person, fingerprinting drivers makes a lot of sense. Citizens don’t know or care how long it takes, they just know they’ve had some creepy drivers in the past and fingerprinting might get rid of them.

What really hurt Uber and Lyft though was that they got too cocky. They’ve had a lot of success (New York, Broward County, etc) in the past overcoming regulation and it seemed like they were developing a pretty solid game plan: rile up their user base, show them what life would be like without them, pull out if they had to and then put pressure on city council until they’re asked nicely to come back.

In Austin, they used that same game plan, but instead of just targeting the people that use Uber and Lyft, they made A LOT of noise. Too much noise in fact. Ridesharing Works took out full page ads in the Austin Statesman, they blasted prime time TV with ads and stuffed mailboxes full of flyers. Basically they let anyone and everyone know that there was a vote coming up instead of focusing on getting their supporters out to vote.

This aggressive campaigning pissed off a lot of people who don’t even use Uber and Lyft and ended up voting against Prop 1. Typically, we see a much higher voter turnout among older citizens and a much lower voter turnout among younger citizens. But when you look at who actually uses Uber and Lyft, it’s no surprise that 18-29 year olds are their number one demographic. There’s actually an inverse relationship between age and percentage of people who have used ride-hailing services. So in other words, all the old people in Austin who make up a majority of actual voters don’t use Uber and Lyft and ended up voting against Prop 1.

2. Nobody Really Cares About Fingerprinting

This whole fiasco started over fingerprinting, but one thing we found ourselves NOT talking about over and over was fingerprinting. The current regulatory battle appears to be more about TNCs vs City Council as opposed to whether or not fingerprinting makes things safer.

My personal opinion is that both fingerprinting and live scan (name-based checks) have flaws. But according to councilmember Ann Kitchen, with whom we spoke, the fingerprinting requirement stems from an FBI report they were given saying fingerprints are safer than name-based background checks. So essentially, they are listening to the experts on this one, but it’s not hard to find experts on both sides of the argument.

Uber has argued the fingerprinting process could produce false positives and unfairly bias potential applicants, but it’s hard for me to buy this when they care so little about false positives with the current system. Any driver who’s ever found an error on their background check and had to deal with Uber and Checkr customer support can tell you that’s about as much fun as putting your head in between a vice.

The real reason why Uber can’t operate with fingerprinting is because half of their drivers quit after one year. I think it’s a cop out to blame fingerprinting on not being able to operate, couldn’t you just as easily say it’s their low retention rate that’s preventing them from operating? Either way, it seems like fingerprinting really isn’t the issue here.

3. Uber and Lyft Didn’t Have To Bail

One thing to point out is that Uber and Lyft voluntarily left Austin after Prop 1 was defeated. In fact, they pulled out Monday morning after the vote leaving almost no time for drivers to figure out what they were going to do to survive.

I think this was a really shitty thing to do to drivers, especially on such short notice. Almost overnight, 10,000 drivers were without work and had to scramble to pay the bills. We talked to dozens of drivers while we were in Austin and here are just a couple of the stories that stood out:

One driver told us that he had actually been driving to Dallas (3 hours away) and renting an Airbnb for Thursday-Sundays and working 15 hour shifts just to pay the bills.

Another 57 year old driver that we talked to was forced to go back to day labor and he had been digging ditches in the weeks following Uber/Lyft’s departure. We caught up with him on his first day driving for FARE and he was ecstatic just to have a rideshare job again and be able to ferry passengers around in his car with the A/C on full blast.

Uber and Lyft have tried to paint the picture that the city of Austin was responsible for them pulling out, but if anything the city was actually the more reasonable party. Even if you don’t agree with the fingerprinting requirements, they at least tiered the requirements in order to allow TNCs to have 25% of their drivers fingerprinted by May 1, 50% by Aug. 1, etc.

Uber was actually telling drivers signing up for their Xchange Leasing program right up until the last minute that that ‘they would not be pulling out of Austin’. I understand why Uber and Lyft pulled out, but they could have handled it in a much better way. I guess we’ve come to expect that behavior out of Uber, but not Lyft, which brings me to…

4. Lyft Should NOT Have Left Austin

I think it was a big mistake for Lyft to leave Austin alongside Uber. Unfortunately, this strategy of working together with Uber on regulatory issues isn’t all that new. They’ve battled together on fingerprinting, airport legislation and more, over the years, and I’ve never understood why. For two companies that hate each other as much as they do, Lyft pulling out of Austin benefits Uber a lot more than it benefits Lyft.

Austin was actually one of Lyft’s top markets at 40% market share and there isn’t a single scenario that I can think of that involves Lyft leaving and somehow ending up better off than they were before. Uber churns and burns through its drivers which is why a fingerprinting requirement is so onerous for them. I don’t know anything about Lyft’s churn rates but it shouldn’t matter since they have way fewer drivers than Uber (Uber had 400,000 drivers as of 11/2015).

Stricter on-boarding requirements hurt Uber because they do such a poor job at retaining drivers, yet driver satisfaction has always been high with Lyft; it’s actually one of their strengths. So it would make sense that Lyft would actually welcome stricter regulations since it would play to their strength and help them catch up in market share. That is exactly why you see so many start-ups currently flocking to Austin and willing to embrace fingerprinting. They know they could never compete with Uber and Lyft on an open playing field, but with those two gone, it’s a whole new ballgame.

Fingerprinting requirements might hurt the industry as a whole and stifle growth, but it would help Lyft gain market share and take market share away from Uber. Once they’re neck and neck, Lyft can go pull out of all the markets they want hand in hand with Uber.

If Lyft would have stayed, they could have had the entire Austin market to itself. The fingerprinting requirements actually don’t go into effect until February of 2017, so that would have been 9 months to build up market share! Oh and there’s actually no penalty for not complying either. None of the current start-ups in Austin met the 25% quota on time and none were penalized by the city – the city council still needs to figure out what the penalty will be.

It would have been a slam dunk for Lyft to become the rideshare option of choice for Austinites if Uber left and, even if Lyft did eventually pull out too, it would have been like free word of mouth marketing until that point. It’s almost like Lyft forgot that Uber once waged a campaign called SLOG where they literally would send Uber employees into Lyft cars and offered them $500 to switch to Uber.

I just don’t buy Lyft’s argument for leaving and, to me, pulling out of Austin is a second place move.

5. State Legislation Is Still An Option, Sort Of

I think it’s clear by now that Uber and Lyft won’t come back if there’s any type of mandatory fingerprinting requirement, but one way around that is at the state level. Typically, TNCs have tried to work things out at the local level but if that fails, they turn to regulation at the state level. State legislation also saves these companies a lot of money since they don’t have to develop separate protocols and follow different rules for different cities.

Rideshare-friendly legislation was introduced in the last legislative session in Texas but it ended up stalling. This time around, a new bill appears to have more support and House Rep. Lyle Larson told us that he feels that it will pass. The only problem is that the next legislative session isn’t until 2017 so the earliest this could go into effect would be the middle of 2017. Uber and Lyft can’t wait that long.

6. Uber and Lyft Are Going To Wait Things Out For Now

At this point, there’s not a lot of incentive for either side to try and reach a compromise. The Austin City Council knows this issue was put to a vote and the people voted against Prop 1 (or to keep the fingerprinting requirements). Now there are multiple companies looking to fill the gap left by Uber and Lyft, so it’s not like the citizens are completely stranded, just slightly inconvenienced.

Lyft and Uber took a big stand and they’d look pretty dumb if they caved now, so all they can really do is sit back and hope for the worst. Both have held appreciation events for drivers (although Uber wouldn’t let me in to their driver appreciation event in Austin), but they’re not exactly providing or suggesting alternative work opportunities for drivers.

In the past, they’ve left places like Broward County over fingerpinting requirements and waited until the public outcry forced politicians to cave. But I don’t see that happening in Austin because there are lots of companies stepping up to meet demand. I don’t think Uber and Lyft expected all these companies to move in, but now they have to sit back and hope all these new start-ups fail.

7. You Can Still Get Around Austin If You’re Determined

Any time two companies as big as Uber and Lyft leave a city overnight, it’s going to cause some disruption. I think they knew this though and that’s one of the reasons why they left so abruptly. That way, citizens would have to go cold turkey. And while the first few weeks were, as expected, rough for passengers and drivers, things are definitely starting to look up.

We took rides with six different apps while we were in Austin and although some worked better than others, we never had much of a problem getting around. My personal favorites were Fasten and RideAustin (still in beta but we got a test drive) since they appeared to have the smoothest technology and were also eerily similar to the Uber app.

All of the different Austin Rideshare Apps UI’s (courtesy of Greta @ Evercar)

My Prediction: Uber and Lyft Will Come Crawling Back

I think Uber and Lyft got cocky with Austin and it’s going to come back to bite them. In the past, when Uber has pulled out of places like Broward County, there weren’t viable alternatives, but things are different in Austin.

These new guys aren’t on the same level as Uber or Lyft but they do get the job done. The next 2-3 months will be very telling though since there’s no way a market like Austin can support 9 different rideshare companies. But will these new guys be able to handle big events like the start of University of Texas football and a little event called SXSW?

Eventually, there will be a couple winners in Austin, but I’m not convinced they’re going to be named Uber or Lyft.

Drivers, what do you think about the aftermath of Austin? Did Uber and Lyft make a mistake in leaving or was it the right move?

Make Every Mile Count

Did you know that every 1,000 business miles can generate $535 in tax deductions? Never miss another mile with the new QuickBooks Self-Employed automatic mileage tracker.

I'm Harry, the owner and founder of The Rideshare Guy Blog and Podcast. I used to be a full-time engineer but now I'm a rideshare blogger! I write about my experience driving for Uber, Lyft, and other services and my goal is to help drivers earn more money by working smarter, not harder.

1) In this article it would be nice to know what the cost per driver is for fingerprinting. I totally understand why Lyft/Uber don’t like fingerprinting as spelled out that its tied to driver retention. I personally know a couple people who have drove for only a few weeks before deciding it wasn’t for them (one took a handful of rides, the other maybe 75 before bailing). I’m sure many drivers would get approved with the cost of fingerprinting added but then drive for just a few weeks/months and then quit.
2) I’m sure that Uber/Lyft had an agreement between them that they both leave if they lost. If Lyft had decided to stay I actually think Uber would have been unhappy that Lyft caved and stayed but they’d have stayed as well. I doubt very much Uber would have left and allowed Lyft to totally own the market so I don’t see the scenario where Lyft would have been left in Austin alone.

iansltx

Cost per driver is $39. Some TNCs (RideAustin, Get Me, soon Fare) are offering to reimburse that.

As for U/L pulling out in concert, was definitely a prisoner’s dilemma. If Lyft stays when Uber goes, that decreases the negotiating power of both for future city regs. So they had to leave. Though their negotiating power is lower now since, for example, Fasten will likely have an easier time jumping into the next market Uber pulls out of.

Bill Hibbler

I got fingerprinted in Houston last Monday. I made an appointment online with several locations to choose from. The whole process took about twenty minutes including wait time and cost $40.

Honestly not many drivers are fingerprinted haha so we didn’t get a chance to talk to more than a couple but as Bill/Ian have pointed out, it’s about $40 and doesn’t take too long.

Uber may have stayed if Lyft stayed but why not just tell Uber you’re going to leave and then stay? That’s totally something that Uber would do but I guess Lyft doesn’t want to be #1 bad enough to do whatever it takes to win 🙂 Then at least they could make Uber look stupid by bailing and then coming right back haha.

Anna Maul

At least a few thousand drivers were processed by the time I got my TNC card on May 28th. ..and many more since then. Not sure if word on the street is very factual.

One driver who had recently gotten fingerprinted showed us his card and it was #1,023 or something like that and I think they just go in numerical order..

Christian Perea

If driver pop is 10K and Kitchen told us around 1100 got their card that would put it at around 11% of drivers so far.

Anna Maul

$40.58 including tax to be processed through IdentiGo. To pick up the TNC license is a fiasco. You must call ahead to confirm it is ready, go to 1111 Rio Grande between 8:30 and 12:30 M-F (unless they are closed due to court ..then you will see a sign on their door), find street parking to pay for, and go in to wait while they print it up there on the spot. Remember to bring your Driver’s license and IdentiGo receipt or you will be turned away.
…and hopefully you don’t need ADA accessible entrance or parking because this City building is far from ADA compliant.

Hello Anna. Where is it I need to go to pick up my license? Austin Court?

What is the phone number. They never told me about calling and how to get my license.

Thank you,

Alain

Anna Maul

5129741551 is the number of the Ground Transportation Office. You should also receive this information in an email from IdentiGo. The info is also on the IdentiGo website.

Alain Braux

Thank you Anna. Much appreciated 🙂 Alain

Anna Maul

No problem, and feel free to stop in at the Weekly South Driver Meet-up (every Wednesday 7:30-9:30 @ Southpark Little Woodrow’s).

Kenneth Bloomer

Very astute, Harry. Yes, Uber and Lyft will come crawling back eventually. I hope they wither on the vine when they do.

Bill Hibbler

Thanks for the article, Harry! I agree that Uber & Lyft got way too cocky on this one and they failed to understand the Austin market’s tendency to prefer to keep things local. When you two flew in, did you notice that they Austin airport doesn’t have Starbucks, McDonalds or Subway? Austin only allows local eateries to set up shop in the airport. Some of the new TNC’s aren’t based in Austin although I’ve noticed one or two relocating their home offices here.

While I do feel this started with Ann Kitchen and other council members being influenced by the taxi/limo lobby, it quickly became a battle of egos. Ultimately, I think Uber will return. I’m not sure about Lyft. They didn’t return to Houston.

If Uber does come back, I think they’ll regain some passengers due to their low prices. Some drivers may return to collect bonus money but I predict they’ll still keep those other apps on.

Great point, even in downtown there wasn’t a single fast-food type chain. And yea I do think it was influenced by taxis at the beginning but there’s no way this huge battle has much to do with that anymore..

I think that the landscape (For Ridesharing) around the country is going to change in the next five years. If the industry does not regulate its self governments will be happy to do so. I see small rideshare companies opening up in different markets. At first they will be filling niches in their markets. As they gain in popularity and do things better than the big guys they will gain more and more market share. Eventually there will be networks connecting all these local Rideshare companies together.

“The real reason why Uber can’t operate with fingerprinting is because half of their drivers quit after one year.”

care to explain how one is related to another?

Anthony Nguyen

With a high turnover rate or drivers, Uber needs to onboard half their total number of drivers every 6 months. To onboard that many drivers (around 5,000 every 6 months), you need a fast automated process. Fingerprinted would slow down the process to the point that the TNCs would not have enough drivers to meet demand.

Uber could always trying raising the rates back up. Higher pay would surely decrease the driver turnover rates, but may alienate some passengers that have come to expect cheap fares. It is a balancing act that Uber is trying to achieve. As long as Uber can recruit enough drivers, at these low rates, they will keep the rates where they are at. The only way they will increase rates, will be if they simply can’t get any drivers to sign up. At the moment, it seems many drivers are still willing to work for these low wages, even if it is only for a few months. Those few months is really the key for how Uber to keeping the rates low. They are taking advantage of people that decide to try out Uber for a few months, basically skimming off the top. It’s not much difference in how many businesses make money today, just skimming a few percentage off the top.

Exactly. Frankly, I’m surprised the acquisition costs don’t outweigh the cost of just paying drivers more to retain them but Uber’s got some smart people working for them and have a much better sense of their numbers than we do..

Austin will be an interesting study and test of what Uber and Lyft believe will happen. Does requiring a Fingerprint check, really slow down onboarding, to the point that the long term business model would fail? Anecdotally, we do see Lyft has being smaller and having less drivers. Lyft’s onboarding process is much more laborious than Uber’s. With Lyft you need to meet a mentor, go on a test ride and pass a vehicle inspection. So is the reason Uber is bigger, because of their totally streamlined, online boarding process? Time will tell if all these other TNCs can make it in Austin, after agreeing to everything the city wants. If these new TNCs can succeed, then Uber and Lyft will have lost the argument. If each TNC fails, then Uber and Lyft will be able to say ‘I told you so..’ I’m glad that we actually can test out the theory, so we no longer have to reply on our gut feelings.

Uber did the same thing in Kansas last year. Although circumstances were a bit different, the only reason they pulled out was because they knew that Kansas was such a small market that they could pull out and make a big stink in the media without it affecting their bottom line much. They came back in two weeks, but that was because the Kansas legislature caved to most of Uber’s demands and nothing really changed, other than now we have to notify our insurance company of the activity that we are doing.

Additionally, they did not have to leave. The legislation that was being debated was in May, 2015. Even if it would have been passed and approved, it would not have gone into effect until January, 2016. But Uber just simply got all cocky and flipped the switch off immediately with no notice to drivers until about three hours after they did it. They tried to paint the picture that the KS legislature was the evil bully. It didn’t fly. Additionally, uber has waged this pathetic campaign and thrown out these very similar threats in about 15-20 markets across the US. The story has jumped the shark and virtually nobody believes them anymore.

I believe that what happened in Austin will be the beginning of Uber’s downfall. This was a huge mistake. With Uber’s unnecessary race to the bottom on rates, it will eventually just be another crappy taxi service. It has nearly already happened here in Wichita, anyway. I hear every weekend from riders about creepy drivers and run down cars. It is such a shame. Riders tell me every night that they don’t understand why it is so cheap and that they would glady pay more because it is (was) so much better than the traditional taxi services.

I think their strategy of pulling out works well in small markets where it doesn’t make sense for competitors to jump in but not in a place like Austin. I’ve heard the same as far as the quality of Uber service on the decline but don’t have a good way to prove it 🙂

Anita Edwards

Great article, Harry – you nailed it! Shame on them and I hope at least a couple of these new TNC’s will soar so that U&L won’t succeed if they do come back. My best friend voted against Prop 1 (knowing it could remove my income) for all the reasons you listed – bombarding, lavish spending, lies, etc. I wish I knew you were gonna be in Austin and, yeah baby, Torchy’s rules (but it’s not Mexican food, definitely not Tex-Mex!). Thanks for complete down low!

Fingerprinting is not a big deal but an inconvenience. Surprising the new rideshare companies did not comply. Did they perform background checks? I do agree Uber and Lyft will probably comeback to Austin.

I think it was more a matter of they had to just focus on on-boarding all the former Uber and Lyft drivers.

TimGNO

I think the most valuable takeaway from this entire discussion is that it shows just how EASY it is to develop a rideshare app that people are willing to use. Customers honestly could care less who drives them or which company they are driving for. No, they just want to open their smartphone and go!
The pullout from Austin could therefore wind up being the worst business decision ever for both Uber and Lyft, if local startups can succeed (as I believe they will) filling those niches with well-designed apps!

I wouldn’t say it’s easy but it’s definitely getting easier. Rideshare is becoming more and more of a commodity product and consumers don’t care what app they use or how they get there as long as they get there. The real money may be in integrating all of these smaller guys 🙂

2121xxx

Thie meminds me of Orbitz, et al, having an app that scans numerous airlines and bundles the results for examination. Same could be done with multiple rideshare companies.

Zhabiz Moshari

Uber and Lyft made a right or wrong decision to pull out in your fantastic summary is half complete because you never spoke with high level people in these two companies the way you could do with Austin people, drivers and even city council members. But I can add a small but super important part to your summary as a former Uber/Lyft driver for a history of almost three years and hundreds of rides for both that my overall income after that decision and as a result of driving for other new comer TNCs in Austin got a lot bigger unexpectedly the way that it was almost impossible for me to get even close to it while I was driving for Uber/Lyft even if I decided to sleep in my car and be actively driving 24/7.
Now you can say or imagine the rest of the story for yourself.
Besides no more text messages mostly from Uber while criticizing it’s drivers that aren’t active or force them to go out and work on a job that at least they believe and always said it’s a self employed job with flexible schedule for everyone.
I personally love seeing what happened in Austin.

We spoke with the Lyft GM, they just didn’t give us much info. Tried to talk to Uber, but they kicked me out of their pizza party haha.

curvesides

Here’s what Curvesides is planning on doing for drivers and its amazing how we have found some of our ideas on competitors sites.

We here at Curvesides Have no plans on trying to compete with our competitors. Higher pay means higher rates. Compared to our competitors charging drivers 10- 20 and 30%, commission verse $65 a week, seems to be very reasonable. Our goal is unlike any of our competitors, we believe that by reducing the rates for passengers and allowing the drivers to keep what they make opens the door for greater success.

For Drivers and Passengers: Curvesides will answer any and all calls we receive, between 6 am and 9pm Monday to Sunday, Our Reps also answer E-mail within two hours no exceptions.
In-app tipping: We do not have in app tipping but we do allow tipping with our partnering company Trip Cam which each driver will be required to have. Curvesides does have employees who are not drivers, all drivers are independent contractors and all Employees are none drivers.
The difference between Curvesides and our competitors , we will set aside a small portion of the company for the drivers, that’s right you heard me the drivers will own shares of the company, sit on the board and help make decisions.

We will be going public in the near future and Curvesides Drivers will have the first option the purchase shares not the cooperate world. All Drivers will be required to undergo a criminal background check and finger prints which we will re-reimburse the driver, we will not give those who see us as a threat the opportunity to slander our name because we are not making sure the consumer is safe when riding with our drivers. We have partnered with many other companies to make sure our contractors/drivers have the best experience with Curvesides, here is some of those partners examples.

1. Three cars wash in the city of Philadelphia where drivers can go get their car washed for $2 and Curvesides will pay $8 of that $10 wash once a week.
2. One Tire and break shop where drivers in the city of Philadelphia can go to get new tires and breaks if needed after driving with Curvesides for a year and more than 40 hours a week.We pay 60 percent of that cost and we stand by it.
3.Auto Repair Insurance: If your car qualifies you will pay into auto repair insurance each month so that if your motor or trans goes a large percentage of the cost will be covered.
There is much more that Curvesides have put in place for our Drivers/contractors and we here at Curvesides do not make promises we cannot keep,so you can come drive for change or keep complaining with our competitors in hopes that they will hear you.

We do not have all the answers but We are pretty sure we will get there with the help of our Drivers/Contractors.

Want us in your city feel free to contact us………………215-398-8614 or [email protected]:disqus .com

Curvesides.com

curvesides

We are not trying to compete with our competitors , we are just trying to create an environment that suites our contractors. As we grow we are sure our App will get better, our competitors Apps are not what they were when they stated today. Pictures of App is just example nothing more.

About

I'm Harry, the owner and founder of The Rideshare Guy Blog and Podcast. I used to be a full-time engineer but now I'm a rideshare blogger! I write about my experience driving for Uber, Lyft, and other services and my goal is to help drivers earn more money by working smarter, not harder. Read More…

Join our e-mail list today and we'll send you a free PDF copy of The Ultimate Guide To Being A Rideshare Driver!

Blogroll

FTC Disclosure

Please note that The Rideshare Guy has financial relationships with some of the merchants mentioned here. The Rideshare Guy may be compensated if consumers choose to utilize the links located throughout the content on this site and generate sales for the said merchant.